L

DEPARTMENT OF INSURANCE, FINANCIAL INSTITUTIONS AND PROFESSIONAL REGISTRATION

P.O. Box 690, Jefferson City, Mo. 65102-0690

RE: Examination Report of Farm Bureau Life lnsurance Company

ORDER

After fu ll consideration and review of the report of the .financial examination of Farm Bureau Life Insurance Company for the period ended December 31, 2009, together with any wrinen submissions or rebuttals and any relevant portions of the examiner's workpapers, r, John M. Huff, Director, Missouri Department of Insurance. F inancial Institutions and Professional Registration pursuanl to section 374.205.3(3)(a), RSMo., adopt such report. After my consideration and review of such report, workpapers, and 'Written submissions or rebuttals, the findings and conclusions of the examination report are incorporated by reference and deemed to be my findings and conclusions to accompany this order pursuant to section 374.205.3(4), RSMo.

Based on such findings and conclusions, l hereby ORDER, to take the following action or actions. which I consider necessary to cure any violation of law, regulation or prior order of the Director revealed by such report: (1) implement, and verify compliance \vith, each item mentioned in the General Comments and/or Recommendations section of such report; (2) account fo r its financial condition and affairs in a manner consistent with ihe Director's findings and conclusions.

So ordered~ signed and official seal affixed this 25th day of February, 2011.

John M. Huff, Director Department of Insurance, Financial Institutions and Professional Registration

REPORT OF THE

ASSOCIATION FINANCIAL EXAMINATION OF

FARM BUREAU LIFE INSURANCE COMPANY OF MISSOURI

ASOF

DECEMBER 31, 2009 F\LED

STATE OF MISSOURI

DEPARTMENT OF INSURANCE, FINANCIAL INSTITUTIONS A.ND PROFESSIONAL REGISTRATION

JEFFERSON CITY, MISSOURI

TABLE OF CONTENTS

SCOPE OF EXA_MINATION .................................................................................................................... 1

PERIOD COVERED ..................... ............... .......... ...................................... .. ............. .................................. 1

PROCEDURES .................................................................... ................ ......................................................... 2

SUMMARY OF SIGNIFICANT FINDINGS ........................................................................................... 2

SUBSEQUENT EVENTS .. ..................................................................... .................................................... 2

COMPANY HISTORY ............................................ ... ...................... ................... .......... ... .......................... 3

GENERAL .. .................................................................................................................................. .... .......... . 3

CAP IT AL STOCK ...................................................... .................................. ....... ......................................... 3

DIVIDENDS AND CAPITAL CONTRIBUTIO~S ................................................ ........ .... .. ....... .... .. ................... 3

MERGERS MTO ACQUISITION'S ....................................... ..................... .... .. .. ..... .. ....................................... 4

CORPORATE RECORDS ....... ........................... ........................................ .......................................... ..... 4

MANAGE1\'1ENT AND CONTROL .................................... .. .................................................................... 4

CORPORATE GOVER~ANCE ...................................... ..... .. ................. ....................... .. ....... ....... ............. .... . 4

COMMIITEES ............. ....... ... ....................................................... ........ ...... ........................ ....... .. ................ 5

OFFICERS ........ ........ .. ................................................ .... ...... ....... ........ .......................... ........ .. ..... ............... 6

HOLDING COMPANY, SUBSIDIARIES AND AFFI11ATES ........ ..... ........ ....... .................................................. 6

ORGANIZATIONAL CHART .............. ......................... ..................... ............................... .............. ....... ........ 7

lNTERCOMPANY AGREEMENTS ....... .... .... ........................ ............................... ..................... ...................... 7

lNTERCOMPANY PAYMENTS .. .............. ... ........... ... ...... ......... ... .... .... .. ..... ........................................... ...... .. 9

FIDELITY BOND AJ.'(l) OTHER INSURANCE ..................................... ................................................ 9

PENSION, STOCK OWNERSH1P AND INStHlANCE PLANS ......................................... ,, ................ 9

TERRITORY AND PLA.N OF OPERATION ............. ............. .................................................... ......... 10

GRO~'TH OF COMPANY ....................................................................................... ............................... 10

LOSS EXPERIENCE ... m .......................................................................................... ..................... .......... 11

REINSURANCE ........................................................................................... ....... ............................ .......... 12

GENERAL ....................................................................................................................... .......................... 12

ASSLJl\.1ED ................. .. ........................... ................................................................ .................................. 12

CEDED ............ .... .. .............. .. ........ .......................... .. ... .... .. ................... ......................................... .......... 12

ACCOUNTS AND RECORDS ........................................... .................. ......................... .......................... 13

STATUTORY DEPOSITS ... .......................... ........................... ............................................................... 14

D EPOSITS WITH THE STATE OF M lSSOURl .......... ...................... ............ .................... ...... ...... ................... 14

D EPOSITS WITH OTHER STATES ................. .. ............................ ........................................ ........ .. ............. 14

FINANCIAL STATEMENTS ........................ .... ... ........ ........ .............................. ..................................... 14

ASSETS ... ...... .......... ............... .. .. ... ........................................................ ............................ .. ....... ...... ........ 15

LIABfLlTIES, SURPLUS AND OTHER FUNDS ........ .................................................... ................................. 16

ST A TEMENT OF lNCOtvfE .............. ............... .......... ............................................................ ....................... 17

COMMENTS ON FINANCIAL STATEME:'.'fT ITEMS .................... .................................................. 18

EXA_MINATION CHANGES .................................................................................................................. 18

GENER;\!, COMMENTS AND/OR RECOMMENDATIONS ........................ ......... ..................... ..... . 18

ACKNO\VLEDGMENT .. ...................................... .... ... ........ ......................................... ..................... ..... . 19

VERIFICATION ........ ............ ................................ ........ ....... ......................................... .. ................... ..... . 19

SUPERVJSION ..... ...... ...... .. ............................. ....... ............................ ............ ........................................... 20

i i

Honorable Alfred W. Gross, Commissioner Virginia Bureau of Insurance Chairman, Financial Condition (E) Committee

Honorable Mary Jo Hudson, Director Ohio Depanment of Insurance Secretary, Midwestern Zone, NAlC

Honorable John M. Huff, Director Missouri Department of Insurance, Financial Institutions and Professional Registration 301 West High Street, Room 530 Jefferson City, Missouri 65101

Ladies and Gentlemen:

Jefferson City, Missouri January 12, 2011

In accordance with your financial examination warrant, a full scope assoc1auon financial examination has been made of the records, affairs and financial condition of

Farm Bureau Life Insurance Company of Missouri

hereinafter referred to as such, as FBL, or as the Company. Its administrative office is located at 701 South Country Club Drive, Jefferson City, Missouri, 65109, telephone number (573) 893-1400. This examination began on April 6, 2010, and concluded on the above date.

SCOPE OF EXAMINATJON

Period Covered

The prior full scope association financial examination of FBL was made as of December 31, 2005, and was conducted by examiners from the State of Missouri representing the Mid\i,•estern Zone of the National Association of Insurance Commissioners (NAJC), with no other zones participating.

The current full scope association financial examination covered the period from January 1, 2006, through December 31, 2009, and was conducted by examiners from the State oCvlissouri, representing the Midwestern Zone of the NAIC, with no otl1er zones participating.

FBL-12/31/2009 Exam

This examination was conducted concurrently with tbe examination of the Company's affiliate, Farm Bureau Town & Country Insurance Company of Missouri (FBT&C), and the Company's subsidiary, Fann Bureau New Horizons Insurance Company of Missouri (FBNH).

This examination also included the material transactions and/or events occurring subsequent to the examination date, which are noted in this report.

Procedures

This examination was conducted in accordance ,,vith the NAIC Financial Condition Examiners Handbook, except where practices, procedures and applicable regulations of the Missouri Department of Insurance, Financial Institutions and Professional Registration (DIFP) and statutes of the State of Missouri prevailed. The Handbook requires that we plan and perform the examination to evaluate the financ ial condition and identify prospective risks of the Company by obtaining information about corporate governance, identifying and assessing inherent risks, and evaluating the Company's controls and procedures used to mitigate those risks. An examination also includes assessing the principles used and sign ificant estimates made by management, as well as evaluating the overall financial statement presentation, management" s compliance with Sta1utory Accounting Principles and annual statement instructions.

All accounts and activities of the Company were considered in accordance ,vith the risk-focused examination process. The key activities identified in our examination of FBL, were as follows:

• Investments • Claims Handling • Related Party Transactions • Premiums • Reserving • Reinsurance • Underwriting

The examiners relied upon information supplied by the Company's independent auditor, Williams Keepers, LLC, of Jefferson City, Missouri, for its audit covering the period from January 1, 2009 through December 31, 2009. Areas in which the testing and results from the CPA workpapers were relied upon in our examination included internal controls, paid claims data, income taxes. deferred taxes, legal representations, bank confirmations. and fraud assessmem.

SUMMARY OF SIGNIFICANT FINDINGS

It was determined that the Company does not have an adequate process for the disclosure of possible conflicts of interest by directors, officers, and key employees. The current process only requires signatures from all individuals collectively on a single piece of paper. There is no process for the individual reporting of conflicts of inlerest, which is the common business practice for most insurance companies.

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FBL - 12/31/2009 Exam

SUBSEQUENT EVENTS

The ultimate parent company, Missouri Farm Bureau Federation (MFB-Federation), issued a press release on July 28, 2010 stating that its President, Charles E. Kruse, would not seek re­election to office. Mr. Kruse is also the President and a director for FBL. _Mr. Kruse "'ill continue to serve as President for MFB-Federation and all subsidiaries until the next election of officers in December 2010.

COMP ANY HISTORY

General

FBL was incorporated on May 6, 1950 under the laws of the State of Missouri and commenced business on July 27, 1950. The Company operates as a stock life and health insurer under the insurance laws of Chapter 376 RSMo (Life and Accident Insurance).

Capital Stock

The Company's Articles of Incorporation allow for the issuance of 6,000 shares of common stock with a parva]ue of$ 100 per share. As of December 31 , 2009, all 6,000 shares were issued and outstanding to Missouri Fann Bureau Services, Inc. (MFB-Services) for a total capital stock balance of $600,000.

Dividends and Capital Contributions

The Bylaws allow for dividends to be paid on common stock shares, pursuant to a declaration of the Board of Directors. The ultimate parent, Missouri Farm Bureau Federation has adopted a genera] policy to require an annual dividend from FBL that is equal to 10% of the prior year's net income. The follo"ving dividends were declared and paid to the direct parent. .MFB-Services: during the examination period.

Year Dividends Paid 2006 $ 194,799 2007 133,120 2008 141,788 2009 254,130

No capital contributions were made to the Company during the examination period.

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FBL- 12/31/2009 Exam

Mergers and Acquisitions

On September 4, 2009, FBL paid $985,400 to acquire an additional 20,000 shares of its jointly ovmed subsidiary, FBNH, from an affiliate, Missouri Farm Bureau Insurance Brokerage, lnc. This purchase increased the Company's ownership of FBNH from 33.3% to 50.0%.

CORPORATE RECORDS

The Company's Articles of Incorporation and Bylaws were reviewed. There were no amendments during the examination period. The minutes of the Board of Directors' meetings, written consents in lieu of meeting, and the sole shareholder written consents were reviewed for proper approval of corporate transactions. In general, the minutes and ,vri tten consents appear to properly reflect and approve the Company's major transactions and events for the period under examination.

MANAGEMENT Al\1D COff fROL

Corporate Governance

The management of the Company is vested in a Board of Directors, which is appointed by the sole shareholder. The Company's Bylaws specify that the Board of Directors shall consist of twelve (12) members. The directors of the ultimate parent, MFB-Federation, simultaneously serve as directors all of its subsidiaries, including FBT &C.

The Board of Directors elected and serving, as of December 31, 2009, were as follows:

Name

William C. Bastin, Jr.

Todd P. Hays

C. Blake Hurst

Leon Kreisler

Charles E. Kruse

Paul W. LePage

Denny W. Mertz

Allen Rowland

J. Dwayne Schad

Teribeth A. Spargo

Bal R. Swaney

Barbara L. Wilson

Principal Occupation and Business Affiliation

Farmer and Seed Dealer, Self-Employed

Farmer, Self-Employed

Farmer, Self-Employed

Rancher, Self-Employed

Farmer, President of MFB-Federation

Farmer, Self-Employed

Farmer, Self-Employed

Farmer, Self-Employed

Farmer, Self-Employed

Ovmer, Spargo Farms, Inc.

Farmer, Self-Employed

Pension Administrator. Steve P. Hagan & Assoc.

4

---------------------- ---- - - ----- ---·------

FBL - 12/31/2009 Exam

The Company's current practice for disclosing possible conflicts of interest is to require all officers, directors) and key employees to sign the same sheet of paper, which states that they collectively do not currently have any conflicts and will promptly notify the Board of Directors if any conflict situation should occur in the future. This process does not allow for disclosure or elaboration of any potential conflicts on an individual basis. It is recommended that the Company create a conflict of interest disclosure form to be completed separately by each officer, director, and key employee on an annual basis.

A recommended format for a conflict of interest form would )fat various examples of transactions and relationships that may be a conflict of interest and require the individual to respond .. Yes .. or "No .. to each item. The form should provide space for each individual to describe the specifics for any ·'Yes" responses. The Company's policy on conflict of interest. as included in the Code of Conduct, may also be included in the form for reference.

Committee

The Articles of Incorporation and Bylaws do not require any committees, but the Articles of Incorporation do allow for committees to be appointed by the Board of Directors. The FBL committees formally appointed and serving as of December 31, 2009, were as follows:

Audit Comminee Hal Swaney, Chairman Todd Hays Carl Bastin

Compensation Comminee Blake Hurst, Chairman Paul LePage Allen Rowland Barbara Wilson

Per Diem & Expense Committee Blake Hurst, Chairman Dwayne Schad Leon Kreisler Teribeth Spargo

The Company also has two informal committees. The Investment Committee consists of staff members from all areas of the Company, including the CFO and representatives of the Company's investment firm. This committee meets quarterly to re,ie,, compliance ,,ith the investment policy, address concerns arising from the economic outlook as related to the in\'estment portfolio, review areas of credit concentration, review credit concerns arising from downgraded investments in the portfolio. evaluate shock analysis for movement in market rates and consider other strategic issues. The Personnel Committee consists of the PresidenL Secretary, Treasurer and Director of Human Resources. This committee provides recommendations to the Board of Directors for companywide pay increases, incentive plan payouts and benefit plan policies.

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FBL - 12/31/2009 Exam

Officers

The officers elected by the Board of Directors and serving as of December 31, 2009, were as follows:

Officer Charles E. Kmse C. Blake Hurst Daniel L. Cassidy Randall J. Campbell

Position Chairman and President Vice President Chief Administrative Officer and Secretary Chief Financial Officer and Treasurer

Holding Companv, Subsidiaries and Affiliates

The Company is a member of an Insurance Holding Company System, as defined by Section 382.010 RSMo (Definitions). An Insurance Holding Company System Registration Statement was fi led by the direct parent, MFB-Services, on behalf of FBL and its other insurance subsidiaries for each year of the examination period. FBL is ultimately owned 100% by Missouri Farm Bureau Federation.

Below is a description of the business operations of all affiliated entities.

• MFB-Fcdcration - The ultimate parent company is a not-for-profit organization that promotes the interests of its member fanners and the agriculture industry. Profits from the insurance operations of FBT &C, FBL and FBNH are the main source of income for the consolidated operations of MFB-Federation.

• MFB-Services - A holding company that directly or indirectly owns all insurance entities. Employees of MFB-Services conduct most of the daily operations of the insurance entities.

• FBT&C - A property and casualty insurer that writes primarily homeowners, farmowners, automobile physical damage and automobile liability lines of business.

• FBNH - A property and casualty insurer formed in 2005 that specializes in writing property business for individuals "vith poor claims hislory or properties with higher risks due to poor condition or other reasons.

• Missouri Farm Bureau Insurance Brokerage, Inc. - A brokerage designed to place insurance coverages either not offered by or not available through FBT&C, FBL or FBNH. Coverages offered range from workers' compensarion, non-standard automobile, professional liability, individua1 and group health products, disability, Medicare supplements, long-term care and many specialty coverages.

• Missouri Agricultural Marketing Association, Inc. - A dormant entity that had no business operations during the examination period.

• FS, LLC - An enti ty formed in 2006 for the sole purpose of holding ownership to the main office building in Jefferson City, Missouri. O\~nership of the building was transferred from MFBF to FS, LLC at the Lime of its formation to provide tax advantages that could not be utilized by MFBF.

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FBL - l 2/31/2009 Exam

Organizational Chart

Below is an organization chart reflecting FBL's ownership and affiliates, as of December 31, 2009. [Note: All entities incorporated / domiciled in Missouri.]

I Missouri Farm Bureau Federation I I

76% FS, LLC 100% ,---

I I Missouri Farm Bureau Services, Inc. I

24% 100%

I I I Farm Bureau Farm Bureau Missouri Farm Missouri

Town & Country Life Insurance Bureau lnsurance Agricu ltural lnsurance Company Company Brokerage, Inc. Marketing

of Missouri of Missouri Association, Inc.

I so% 50%

I Farm Bureau

New Horizons Insurance Company

of Missouri

Intercompany Agreements

The Company's agreements with related parties that were in effect, as of December 31, 2009 and subsequent periods are outlined below.

1. Type:

Parties:

Allocation of Consolidated Tax Liabil ity Agreement

MFB-Federation, MFB-Services and all subsidiaries

.Effective: September 1, 2005

Terms: MFB-Services and its subsidiaries (including FBL) agree to file a consolidated federal income tax return. The Company will pay estimated federal income tax payments to MFB-Services on or before April 15, June 15, September 15, and December 15 of each current tax year and on or before March 15 of the following year for the extension fi ling. Settlement of lhe remaining tax liability or receivable due with the final tax return will be made afier the final tax return is filed. The allocation of the consolidated federal income tax payments to each entity will be based upon the proportion of each entity's individual taxable income to the consolidated taxable income. A separate adjustment shall be made each year between MFB-Services and each subsidiary for the difference, if any, between the allocated tax payments and the tax liability that would have resulted from each entity filing a separate federal tax return.

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FBL- 12/31/2009 Exam

2. Type: Space Rent Agreement

Parties: FS, LLC, FBT&C and FBL

Effective: October 1, 2006

Terms: FBT&C and FBL utilize office space and facilities in a building located in Jefferson City, Missouri that is ovvned by FS, LLC. This building serves as the home office for FBT&C and FBL to conduct aU major business functions. FBT &C and FBL will pay rent to FS, LLC for the folJowing expenses associated with operating the building: depreciation, maintenance and repairs, utilities, taxes, building management, insurance, interest, and other costs. The rent shall be calculated on an annual basis and charged to FBT&C and FBL based upon the assigned square footage of each entity.

3. Type: Sen1ice Agreement

Parties: MFB-Services, FBT &C, FBL and FBNH

Effective: January 1, 2007

Terms: MFB-Services 'V.riU provide the following services for the subsidiary insurers: executive management, human resources, accounting, legal, audit, investment, information technology, public affairs, mailroom, imaging, printing, supplies, furniture & equipment, fleet rental, building maintenance, janitorial, cafeteria, copying, customer service, and acruarial. The insurers will pay fees to MFB­Services on a monthly basis for the services provided. The fees for most of the provided services are calculated based upon various allocation methods that are specified in the agreement. The fees for some services may be directly attributable to an entity and will be billed based upon actual usage. Fees payable to MFB-Services are to be paid within 60 days after the fees have been calculated.

4. Type: Cost Sharing Agreement

Parties: MFB-Federation, MFB-SerYices, FBT &C, FBL, FBNH and MFB-Brokerage

Effective: January 1, 2007

Terms: The parties uti lize common management and employees for various operational activities. The costs will be shared among the parties fo r the follO\ving operational functions: underwriting, sales (commissions), sales contests, promotional events, agents payroll, Partners for Grov.rth program ( county office expenses), and other miscellaneous areas. The allocation of costs shall be computed on a monthly basis after actual expenses are determined and are due within 60 days of the computations. The allocation basis for underwriting, commissions, and service center costs is not specified but is to be based upon predetermined percentages that are reviewed annually. Allocation of agents' payroll is to be based upon the production attributable to each entity in the preceding month. The allocation basis for the costs of other activities was not explained in the agreement.

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FBL-12/31/2009 Exam

lntercompanv Payments

Fees and other payments to related parties, pursuant to the above agreements, are listed in the following table:

Amount Incurred {Eamed2 Related Party Agreement 2006 2007 2008 2009 MFB-Services Tax Allocation $577,519 $726.127 $2,107,650 s 530,455 FS, LLC Space Rent 52,608 55,408 52,305 51 ,714 MFB-Services Service 1,725, 139 2,049,134 2,263,975 2,208,598 FBT&C Cost Sharing 437,667 445,077 475,230 341 ,074 MFB-Services Cost Sharing 3,626,318 4,357,684 4,212,484 4,57 l.297 MFB-Brokerage Cost Sharing 4,367,809 3,822,178 4,036,582 4,431,469 TOTAL $ I 0.787,060 $1 1,455,608 $13,148,226 $12.134,607

FIDELITY BOND AND OTHER INSURAi~CE

The Company is a named insured on a financial institution bond that covers losses resulting from dishonest or fraudulent acts of employees. Additional named insureds on the bond are the parent companies and several other affiliates. The bond has a liability limit of $2,000,000 with a $25,000 deductible, which meets the minimum coverage that is recommended by the NAJC.

The Company is also a named insured on various other insurance policies that provide coverage for the following risks: general liability, excess liability, professional liability, umbrella liability, earthquake, worker·s compensation and employers liability, directors' and officers' liability, employment practices liability, and computer crime.

PENSION, STOCK OWNERSHIP AND INSURANCE PLANS

FBL does not have any direct employees and therefore, has no liabilities for employee benefits. The Company's business operations are managed by the employees of the parent, MFB-Services, and by Lhe employees of an affiliate, MFB-Brokerage.

As of December 31 , 2009, MFB-Services had 694 employees and MFB-Brokerage had 234 employees. Approximately 230 of the lvfFB-Services employees are located in the home office in Jefferson City, Missouri, where most functions of the Company are performed. The remaining MFB-Services employees are located in approximately 160 offices located in the 114 counties in the State of Missouri. The county office employees provide various policyholder services, including policy issuance, pol icy changes and claims adjudication. The MFB­Brokerage employees comprise the statewide agency force that produces business for FBL and other affiliated insurers.

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FBL- 12/31/2009 Exam

FBL has a Cost Sharing Agreement with N1FB-Services and MFB-Brokerage and a Services Agreement \.Vit.h MFB-Services, which are described in the Intercompany Agreements section of this report. The Company indirectly pays for the salaries and benefits of MFB-Services and MFB-Brokerage employees through allocated expenses that are paid each month, pursuant to the Agreements.

TERRITORY AND PLAN OF OPERATION

FBL is licensed onl y in the State of Missouri under Chapter 376 RSMo (Life, Health and Accident Insurance). The major lines of business , based upon 2009 direct and net written premiums, are listed in the table below.

Line of Business Ordinary Life Individual Annuities All Other Total

D irect Premiums 63.8% 35.3%

0.9% 100.0%

Net Premiums 59.4% 40.3%

0.3% 100.0%

The Company offers traditional whole life, term life and annuity policies. Most of the whole life policies are participating. The policyholder dividends paid during the examination period averaged $3 million per year.

Business for FBL is produced by a dedicated agency force employed by an affiliate, MFB­Brokerage. There were 231 agents of MFB-Brokerage, as of December 31, 2009. The agents produce business exclusively for FBL and its two affiliates, FBT&C and FBNH. Any risks for lines of business not written by FBL, FBT&C or FBNH are placed by MFB-Brokerage with third-party insurers.

GROWTH OF COMP AJ'lY

Tue table below shows the Company's premium and annuity writings and writing ratios for the most recent five years, which includes the current examination period.

Year 2005 2006 2007 2008 2009

Direct Premiums and Annuity

Considerations $35,202,366

32,744,834 34,552,799 38,311,502 48,036,451

Net Premiums and Annuity

Considerations $3 1,146,227

28,037,407 29,477,635 32,802,010 42,035,284

10

Change in Net

Premiums na

-10.0% 5.1 % 11.3% 28.1%

Capital and Surplus

$50,234,349 51 ,613,460 52,529,267 45,307,232 45,266,911

Ratio ofNet Premiums to Surplus

0.62 0.54 0.56 0.72 0.93

FBL- 12/31/2009 Exam

Direct ·writings increased greatly in 2008 and 2009 due to growth in annuity sales. Individual annuities considerations ,vere $5.3 million in 2007, $8. l million in 2008 and $16.9 mi llion in 2009. which represented a 219% increase over a two-year period. The interest rates oITered on the Company's annuity products were very attractive in comparison to the low rates available elsewhere in the investment market, \vhich led to the large increase in sales volume.

The premiwn to surplus ratio has remained consistently low since the end of the prior examination period (2005). Capital and surplus experienced a 14% decrease in 2008 due to realized and unrealized investment losses. These losses derived from bond defaults and stocks held from issuers that became bankrupt in 2008.

LOSS EXPERIENCE

The table below shows the Company's policy benefits (death claims, annuity benefits, surrender benefits, etc.) and reserve increases for the most recent five years, which includes the current examination period. Also shown in the table are the changes in premiums and annuity considerations for the same period.

Net Premiums Net Policy and Annuity Increase Benefits and Increase

Year Considerations (Decrease) Reserve Increases (Decrease) 2005 $31,146,227 $34,169,329 2006 28,037,407 -10.0% 31,499,479 -7.8% 2007 29,477.635 5.1% 32,536,609 3.3% 2008 32,802,010 ] 1.3% 33.564,251 3.2% 2009 42,035,284 28.1% 45,007,920 34.1%

Overall, the yearly changes in policy benefits and reserves \Vere commensurate to the changes in premium and annuity income.

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FBL - U /31/2009 Exam

REINSURANCE

Genera)

The Company's premium activity on a direct written, assumed and ceded basis, for the period under examination, is detailed below:

2006 2007 2008 2009

Direct Business $32,744,834 $34,552,799 $38,311,502 $48,036,45 l Reinsurance Assumed 0 0 0 0 Reinsurance Ceded:

Affil iates 0 0 0 0 Non-affil iates (4.707,428) (5.075. 164) (5,509.491) (6.001,167)

Net Premiums Written $28.032,406 S29147716JS s:u.so2,o 11 $42,035,28~

Assumed

The Company does not assume any business.

Ceded

The Company retains a maximum of $150,000 per insured life. Risks are ceded under several reinsurance agreements with multiple reinsurers. However, the two main reinsurers for FBL are Generali USA Life Reassurance Company (Generali) and RGA Reinsurance Company (RGA). Below is a summary of the business ceded to Generali and ROA:

Ceded In-Force %of Ceded %of %of as of Ceded Reserves as of Ceded 2009 Ceded Ceded

Reinsurer 12/31/2009 fn-Force 12/31/2009 Reserves Premiums Premiums Generali $1,099,484,844 51.7% $3,032,068 5 1.6% $2,888,463 49.7% RGA 966,550,382 45.5% 2.371.234 40.4% 2,422.420 41.7% All Other 58,970,736 2.8% 471,404 8.0% 498,816 8.6% Total $2, I 25,QQS,262 100.0% $5,874 1Q..6 lQQ.Q~Q $5 802,622 IQQ.Q%

Executive Gold term life policies are ceded to Generali with a coinsurance agreement The Company cedes 80% of the risk of each policy to Generali. FBL 's retention of 20% of the face value is limited to maximum retention of $150,000 per policy. This agreement is closed to new business, but represented the largest amount of ceded in-force and ceded reserves, as of the examination date.

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FBL- 12/31/2009 Exam

Omni whole life and term life policies and Gold whole life policies are ceded mostly to Generali and RGA under separate reinsurance agreements. The Omni and Gold policies are split between the reinsurers depending on the beginning letter of the policyholder's last name. FBL retains varying amounts of each policy and cedes 100% of the face amounts in excess of the retention to the reinsurers. The Company's maximum retention is $150,000 per Life under the terms of each agreement. The reinsurance agreements for the Omni and Gold policies accoun1ed for approximately one-third of the total ceded in-force and ceded reserves, as of December 31, 2009.

FBL entered into two new quota share agreements with ROA during the examination period, which cover the Company's Premier term and Convertible term policies. The Company cedes 75% of the risk of each policy to RGA and FBL retains the remaining 25% of face value. The Company's maximum retention is $150,000 per policy under these agreements.

The Company is contingently liable for alJ reinsurance losses ceded to others. This contingent liability would become an actual liability in the event that an assuming reinsurer fa ils to perform its obligations under the reinsurance agreement.

ACCOUNTS AND RECORDS

The Company's business applications are run th.rough local area networks located in the data center of the home office in Jeffe rson City, Missouri. The Company utilizes a combination of Microsoft Windows based servers and an IBM iSeries midrange server. The base computer application for insurance operations is a legacy system from Policy Management Systems Corporation (PMSC) that ·was installed in 1999. The PMSC system is used for policy management, claims management and other functions. Other significant financial applications include the Solomon General Ledger system that is used for accounting and financial reporting and the Eagle TM system that is used to process investment activity.

The CPA firm, Williams Keepers, LLC, of Jefferson City, Missouri issued audited statutory financial statements of the Company for all years in the examination period.

The actuarial opinions regarding tbe Company's reserves for losses and loss adjustment expenses was issued by Terry M. Long, FSA, MAAA, of Lewis & Ellis, Inc. in Overland Park, Kansas, for all years of the examination period.

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FBL- 12/31/2009 Exam

STATUTORY DEPOSITS

Deposits w ith the State of Missour i

The funds on deposit with the Missouri DIFP as of December 31, 2009, as reflected below, were sufficient to meet the capital deposit requirements for the State of Missouri in accordance with Section 379.098 RSMo (Securities to be Deposited). The funds on deposit were as fo llmvs:

Type of Securitv

State and Municipal Bonds

Deposits w ith Other States

Par Value

$1,200,000

Fair Value

$1,539,000

Statement Value

$1,215,150

Since FBL is only licensed in Missouri, the Company has no funds on deposit wilh any other states.

FINANCIAL STATEMENTS

The following financial statements, with supporting exhibits, present the financial condition of Farm Bureau Life lnsurance Company of Missouri for the period ending December 31, 2009. Any examination adjustments to the amounts reported in the financial statements and/or comments regarding such are made in the ·'Comments on Financial Statement Items." The fai lure of any column of numbers to add to its respective total is due to rounding or truncation.

There may have been additional differences found in the course of this examination, which are not shov:n in the "Comments on Financial Statement Items:· These differences were determined to be immaterial concerning their effect on the financial statements, and therefore, were only communicated to the Company and noted in the workpapers for each individual Annual Statement item.

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FBL - 12/31/2009 Exa m

Assets as of December 31, 2009

Non-Admitted Net Admitted Assets Assets Assets

Bonds $337,065,254 $ 0 $337,065,254 Preferred Stocks 9,496,503 0 9,496,503 Common Stocks 6,782,138 0 6,782,138 Cash. Cash Equivalents and Short-Term 6,363,225

Investments 0 6,363,225

Contract Loans 18,722,086 0 18.722,086 Other Invested Assets 50,009 0 50,009 Investment Income Due and Accrued 3,400,285 0 3,400,285 Uncollected Premiums and Agents' Balances 3,699 0 3,699 Deferred Premiums 6.604,992 0 6,604,992

Amounts Recoverable from Reinsurers 1,600 0 1,600 Other Reinsurance Receivables 56,516 0 56,516 Federal Income Tax Recoverable 275.178 0 275,178

Net Deferred Tax Asset 10,180,523 8,067,321 2,113,202

Guaranty Funds Receivable 214,990 214,990 0 Receivable from Parent, Sub., Affi liates 183.416 0 183.416

TOT AL ASSETS $322.400!414 SB.282.311 S32l.118.103

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FBL- 12/31/2009 Exam

Liabilities, Surplus and Other Funds as of December 31, 2009

Aggregate Reserve for Life Contracts

Aggregate Reserve for Accident and Health Contracts

Liabil ity for Deposit-Type Contracts

Life Contract Claims

Accident and Health Contract Claims

Policyholder Dividends Due and Unpaid

Provision for Policyholder Dividends Payable

Premiums Received in Advance

Interest Maintenance Reserve

Commissions Due and Accrued

General Expenses Due or Accrued

Taxes, Licenses and Fees Due or Accrued

Federal Income Taxes Payable

Unearned Investment Income

Amounts Withheld or Retained

Remittances and Items Not Allocated

Liabil ity for Benefits for Employees and Agents

Asset Valuation Reserve

Payable to Parent, Subsidiaries and Affiliates

Aggregate Write-In Liabilities

TOT AL LIABILITIES

Common Capital Stock

Gross Paid In and Contributed Surplus

Unassigned Funds (Surplus)

Capital and Surplus

TOT AL LIABILITIES AND SURPLUS

16

$316,586.498

12,425

18,421 ,609

1,224,600

13,000

2,216

3,100,575

135,805

3,226,262

324,760

48,045

300,835

126,565

447,834

17,529

536,428

344,124

676,586

297,941

7556

$345,851,193

600,000

50,000

44,616,911

S 45,266,911

$391.11 8,104

FBL-12/31/2009 Exam

Summary of Operations For the Year Ended December 31, 2009

Premiums and Annuity Considerations Considerations for Supp. Contracts with Life Contingencies Net Investment Income Amortization of Interest Maintenance Reserve Commission and Expense Allowances on Reins. Ceded Miscellaneous Income

TOTAL

Death Benefits Matured Endowments Annuity Benefits

Disability Benefits and Benefits Under A&H Policies Surrender Benefits and Withdrawals for Life Contracts Interest and Adjust. on Policy or Deposit-Type Contract Fun Payments on Supp. Contracts with Life Contingencies Increase in Aggregate Reserves for Life, A&H Policies Commissions on Direct Business General Insurance Expenses Insurance Taxes, Licenses and Fees Increase in Loading on Deferred and Uncollected Premiums Aggregate Write-Ins fo r Deductions

TOTAL

NET GAIN FROM OPERA TIO NS Dividends to Policyholders Federal Income Taxes Incurred Net Realized Capital Gains (Losses) NET INCOME

CAPITAL AND SURPLUS: Capital and Surplus, December 31, 2008 Net Income

Change in Net Unrealized Capital Gains or (Losses) Change in Deferred Income Tax Change in Non-Admitted Assets Change in Asset Valuation Reserve Dividends to Stockholders

CAPITAL A.ND SU RPLUS, DECEMBER 31, 2009

17

$42,035,290 119,212

20,753,109 307,954 943,688

422 S64,159,675

$ 6,102,109 282,390

5,224,606 112,378

10,034,901 676,851 481,192

22,093,493 4,340,542 7,869,388

927,219 136,723 58.550

SSS,340,342

$ 5,819,333 3,034,463

530,455 (616,093)

S 1.638.322

$45,307,232 1,638,322 (724,589)

1,084,016 (1,113,855)

(670,080) (254,130)

$45,266.916

FBL- 12/31/2009 Exam

Comments on Financial Statement Items

None.

Examination Changes

None.

General Comments and/or Recommendations

Conflict of Interest Di.sclosure (page 5)

The Company's current practice for disclosing possible conflicts of interest is to require all officers, directors, and key employees to sign the same sheet of paper, which states that they collectively do nor currently have any conflicts and will promptly notify the Board of Directors if any conflict situation should occur in the future. This process does not allow for disclosure or elaboration of any potential conflicts on an individual basis. ll is recommended that the Company create a conflict of interest disclosure form to be completed separately by each officer, director, and key employee on an annual basis.

A recommended format for a conflict of interest form would list various examples of transactions and relationships that may be a conflict of interest and require the individual to respond "Yes" or "No" to each item. The form should provide space for each individual to describe the specifics for any "Yes" responses. The Company's policy on conflict of interesl, as included in the Code of Conduct, may also be included in the form for reference.

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FBL - 12/31n009 Exam

ACKNOWLEDGMENT

The assistance and cooperation extended by the officers and the employees of Farm Bureau Life insurance Company of Missouri during the course of this examination is hereby acknowledged and appreciated. In addition to the undersigned, Shannon Schmoeger, CFE, Steve Koonse, CFE and Timothy Carroll, examiners for the Missouri DlFP, participated in this examination. Timothy Harris, FSA, of Milliman. Inc., also panicipated as a consulting actuary.

VERIFICATION

State of Missouri

County of

) ) )

I, Tim L. Tunks, on my oath swear that to the best of my knowledge and belief the above examination report is true and accurate and is comprised of only facts appearing upon the books, records or other documents of Farm Bureau Life lnsurance Company of Missouri its agents or other persons examined or as ascertained from the testimony of its officers or agents or other persons examined concerning its affairs and such conclusions and recommendations as the examiners find reasonably warranted from the facts.

Sworn to and subscribed before me this \~

My commission expires:

Tim L. Tunks. CPA, CFE Examiner-In-Charge Missouri DIFP

day of D~ , 2010.

19

~~~,LL )Jotary Public

PI\MELA J. ROOT Notary Public • Notary Seat

State of Missouri, County of cooper commission# 07391753

011 My eommlssloo Expires Jan. 9, 2

FBL - 12/31/2009 Exam

SUPERVISION

The examination process bas been monitored and supervised by the undersigned. The examination report and supporting workpapers have been reviewed and approved. Compliance with NAJC procedures and gujdel ines as contained in the Financial Condition Examiners Handbook has been confirmed.

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,;~/4& Mark A. Nance, CPA, CFE -<.:::.... Aurut Manager Missouri DIFP